Company News

Nu Skin Enterprises Reports Record Third-Quarter 2012 Results

PROVO, Utah, Oct. 31, 2012 /PRNewswire/ -- Nu Skin Enterprises, Inc. (NYSE: NUS) today announced record third-quarter results with revenue of $526.2 million, a 23 percent improvement over the prior-year period. Revenue was negatively impacted 3 percent from foreign currency fluctuations. Earnings per share for the quarter were $0.87, a 21 percent year-over-year improvement. Additionally, the company announced that it is increasing its full-year 2012 revenue guidance to $2.11 billion, a 21 percent growth rate over 2011.

"By continuing to execute on our business strategy, we were able to generate another record quarter, putting us on track to reach a milestone of more than $2 billion in annual revenue in 2012," said Truman Hunt, president and chief executive officer. "The quarter was highlighted by healthy trends in all of our regions, strong demand for our anti-aging products and growth in our customer base and sales force.

"We were particularly pleased with local-currency growth in Japan and South Korea. This growth reflects increased distributor activity in anticipation of the October limited-time-offer of our ageLOC Body Spa and related products. Our South Asia/Pacific and Greater China regions generated solid local-currency growth of 53 and 64 percent, respectively. The Americas and Europe regions also reported healthy gains with approximately 20 percent year-over-year local-currency growth," continued Hunt.

"Building on our momentum, we held successful regional conventions in the United States, Japan and Europe in the month of October. We are encouraged by the sales activity we are experiencing in both emerging and more mature markets and we expect to continue to sustain growth in 2013. We also continue to improve the execution of our product launches, strengthen our future product pipeline, and generate healthy growth throughout the world."

Regional Results

North Asia. Third-quarter revenue in North Asia was $184.7 million, compared to $184.3 million for the same period in 2011. The region's results were negatively impacted approximately 2 percent from foreign currency fluctuations. Japan local-currency revenue improved 1 percent while South Korea experienced local-currency revenue growth of 6 percent. The number of executives in the region was up 2 percent while the number of actives improved 1 percent.

Greater China. Third-quarter revenue in Greater China increased 64 percent to $136.6 million, compared to $83.4 million in the prior-year period. Foreign currency fluctuations did not materially impact revenue in the region. Local-currency revenue in Mainland China improved 60 percent over the same quarter in 2011. Third-quarter revenue in Hong Kong and Taiwan included $13.6 million and $7.2 million, respectively, from limited-time offers in the second quarter. The sales leader count in the region improved 51 percent, while the number of actives increased by 38 percent compared to the prior-year.

South Asia/Pacific. Revenue in South Asia/Pacific was $91.1 million, a 47 percent improvement compared to the prior year. Sales in the quarter were negatively impacted 5 percent by foreign currency fluctuations. Limited-time offers generated $29.3 million in revenue during the third quarter. The region's third-quarter executive count improved 22 percent while the active count increased 14 percent compared to the same period in 2011.

Americas. Revenue in the Americas improved 19 percent to $70.5 million, compared to $59.4 million in the prior-year period. The United States posted a 15 percent revenue increase during the quarter. The number of executives improved 14 percent while the number of actives remained approximately even with the prior year.

Europe. Revenue in Europe was $43.2 million, a 9 percent improvement over the prior-year period. Results in the region were negatively impacted 14 percent by foreign currency fluctuations. Executives and actives in Europe increased 23 and 12 percent, respectively, compared to the prior year.

Operational Performance

The company's operating margin remained strong at 15.7 percent for the quarter, level with the prior year. Gross margin during the quarter was 83.5 percent, consistent with the prior year. Selling expenses, as a percent of revenue, were 44.8 percent in the third quarter, representing a 180 basis-point increase. The increase is driven by accelerated sales growth in many of our markets, due in part to successful product launches and a higher number of sales leaders qualifying for promotional incentives. General and administrative expenses, as a percent of revenue, were 23.1 percent, improving 180 basis-points over the prior year. Other income and expenses reflected a gain of $1.2 million compared to a loss of $6.9 million in the prior year.

The company's income tax rate for the quarter was 35.2 percent compared to 22.4 percent in the prior-year period. The lower rate in the previous year was primarily attributable to a one-time tax benefit. The company's cash and short-term investment position at the end of the quarter was $337.7 million. Dividend payments during the quarter were $11.9 million, and the company repurchased $66.3 million of its outstanding shares. The company has repurchased nearly $180 million of its outstanding shares in 2012.

Outlook

"Based on the strength of our business and the growth of our global sales force, we are raising our expectations for the fourth quarter and full year," said Ritch Wood, chief financial officer. "We expect fourth quarter revenue to be in the $520 million to $530 million range, which increases our annual revenue guidance to $2.10 billion to $2.11 billion. Fourth quarter revenue guidance anticipates a 2 percent negative impact from foreign currency fluctuations. We expect earnings per share to be $0.78 to $0.82 for the fourth quarter, and $3.33 to $3.37 for the year."

"We continue to invest in a number of initiatives that we believe will sustain business growth, including our anti-aging product pipeline, sales force development, as well as focus on emerging markets," said Hunt. "We look forward to sharing the details of our future plans with shareholders on November 14th at our annual analyst and investor day, where we will also provide our 2013 financial guidance and an update regarding our accelerated timeline to hit our $4.00 per share earnings target."

The company's management will host a webcast with the investment community on Oct. 31, at 11 a.m. (EDT). Those wishing to access the webcast, as well as the financial information presented during the call, can visit the Investor Relations page on Nu Skin Enterprises' website, http://ir.nuskin.com. An archive of the webcast will be available at this same URL through Nov. 23, 2012.

About Nu Skin Enterprises, Inc.

Nu Skin Enterprises, Inc. demonstrates its tradition of innovation through its comprehensive anti-aging product portfolio, independent business opportunity and corporate social responsibility initiatives. The company's scientific leadership in both skin care and nutrition has established Nu Skin as a premier anti-aging company. The company's anti-aging products feature the new ageLOC® suite of products including the ageLOC® R2 nutritional supplement, ageLOC® Galvanic Spa System and ageLOC® Galvanic Body Spa™, as well as the ageLOC® Transformation daily skin care system. A global direct selling company, Nu Skin operates in 53 markets worldwide and has more than 900,000 active distributors and preferred customers. Nu Skin is traded on the New York Stock Exchange under the symbol "NUS." More information is available at http://www.nuskin.com.

Please note: This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 that represent the company's current expectations and beliefs. In some cases, you can identify these statements by forward-looking words such as "believe," "expect," "anticipate," "estimate," "intend," "plan," "targets," "likely," "will," "would," "could," "may," "might," the negative of these terms and other comparable terminology. Forward-looking statements include, but are not limited to, statements relating to: (i) management's positive outlook for the company; (ii) management's expectations regarding the company's initiatives, strategies and new products; and (iii) management's projections regarding revenue, earnings per share and the impact of foreign currency fluctuations. The forward-looking statements and related assumptions involve risks and uncertainties that could cause actual results and outcomes to differ materially from any forward-looking statements or views expressed herein. These risks and uncertainties include, but are not limited to, the following: (a) any failure of current or planned initiatives or products to generate interest among distributors and customers and generate sponsoring and selling activities on a sustained basis; (b) challenging economic conditions globally; (c) risk of foreign currency fluctuations and the currency translation impact on the company's business associated with these fluctuations; (d) risks associated with general inquiries and complaints to consumer protection agencies in Japan regarding the activities of some distributors; (e) regulatory risks associated with the company's products, which could inhibit the company's ability to import or continue selling a product in a market if it is determined to be a medical device; (f) continued regulatory scrutiny and investigations in Mainland China, which have from time to time in the past, and could in the future, negatively impact the company's business, including the interruption of sales activities in stores, loss of licenses, and the imposition of fines; (g) adverse publicity related to the company's business, products, industry or any legal actions or complaints by distributors or others; (h) any prospective or retrospective increases in duties on the company's products imported into the company's markets outside of the United States and any adverse results of tax audits or unfavorable changes to tax laws in the company's various markets; and (i) continued competitive pressures in the company's markets. The company's financial performance and the forward-looking statements contained herein are further qualified by a detailed discussion of associated risks set forth in the documents filed by the company with the Securities and Exchange Commission. The forward-looking statements set forth the company's beliefs as of the date that such information was first provided, and the company assumes no duty to update the forward-looking statements contained in this release to reflect any change except as required by law.

NU SKIN ENTERPRISES, INC.

Consolidated Statements of Income (Unaudited)

For the Third Quarters Ended September 30, 2012 and 2011

(in thousands, except per share amounts)

2012

2011

Revenue:

North Asia

$ 184,743

$ 184,322

Greater China

136,633

83,367

South Asia/Pacific

91,124

61,819

Americas

70,479

59,407

Europe

43,203

39,501

Total revenue

526,182

428,416

Cost of sales

86,768

70,631

Gross profit

439,414

357,785

Operating expenses:

Selling expenses

235,701

184,203

General and administrative expenses

121,346

106,369

Total operating expenses

357,047

290,572

Operating income

82,367

67,213

Other income (expense), net

1,239

(6,879)

Income before provision for income taxes

83,606

60,334

Provision for income taxes

29,430

13,536

Net income

$ 54,176

$ 46,798

Net income per share:

Basic

$ 0.91

$ 0.75

Diluted

$ 0.87

$ 0.72

Weighted average common shares outstanding:

Basic

59,780

62,285

Diluted

62,060

64,708

NU SKIN ENTERPRISES, INC.

Consolidated Statements of Income (Unaudited)

For the Nine-Month Periods Ended September 30, 2012 and 2011

(in thousands, except per share amounts)

2012

2011

Revenue:

North Asia

$ 544,638

$ 546,853

Greater China

428,972

231,364

South Asia/Pacific

266,789

170,977

Americas

208,585

175,091

Europe

132,435

124,402

Total revenue

1,581,419

1,248,687

Cost of sales

258,108

242,453(1)

Gross profit

1,323,311

1,006,234

Operating expenses:

Selling expenses

705,599

536,845

General and administrative expenses

365,770

311,223

Total operating expenses

1,071,369

848,068

Operating income

251,942

158,166

Other income (expense), net

1,505

(7,428)

Income before provision for income taxes

253,447

150,738

Provision for income taxes

91,035

46,931

Net income

$ 162,412

$ 103,807

Net income per share:

Basic

$ 2.65

$ 1.67

Diluted

$ 2.55

$ 1.61

Weighted average common shares outstanding:

Basic

61,265

61,998

Diluted

63,742

64,408

(1) Includes $32.8 million related to an adverse decision in the Japan customs litigation.

NU SKIN ENTERPRISES, INC.

Consolidated Balance Sheets (Unaudited)

(in thousands)

September 30, 2012

December 31, 2011

ASSETS

Current assets:

Cash and cash equivalents

$ 321,929

$ 272,974

Current investments

15,804

17,727

Accounts receivable

42,293

31,615

Inventories, net

137,052

112,111

Prepaid expenses and other

88,001

95,660

605,079

530,087

Property and equipment, net

194,609

149,505

Goodwill

112,446

112,446

Other intangible assets, net

76,920

83,333

Other assets

126,669

115,585

Total assets

$ 1,115,723

$ 990,956

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$ 41,181

$ 32,181

Accrued expenses

230,507

180,382

Current portion of long-term debt

28,926

28,608

300,614

241,171

Long-term debt

182,752

107,944

Other liabilities

81,966

67,605

Total liabilities

565,332

416,720

Stockholders' equity:

Class A common stock

91

91

Additional paid-in capital

310,868

292,240

Treasury stock, at cost

(694,529)

(522,162)

Retained earnings

992,418

866,632

Accumulated other comprehensive loss

(58,457)

(62,565)

550,391

574,236

Total liabilities and stockholders' equity

$ 1,115,723

$ 990,956

NU SKIN ENTERPRISES, INC.

Distributor/Preferred Customer Growth by Market

As of September 30, 2012

As of September 30, 2011

% Increase (Decrease)

Active

Executive

Active

Executive

Active

Executive

North Asia

336,000

15,603

333,000

15,303

0.9%

2.0%

Greater China

188,000

16,269

136,000

10,801

38.2%

50.6%

South Asia/Pacific

105,000

5,880

92,000

4,809

14.1%

22.3%

Americas

166,000

5,831

166,000

5,106

−

14.2%

Europe

118,000

4,581

106,000

3,732

11.3%

22.7%

Total

913,000

48,164

833,000

39,751

9.6%

21.2%

"Actives" include our independent distributors and preferred customers who have purchased products for resale or personal consumption during the previous three months.